Household Debt and Spending in the United Kingdom

Bunn, Philip; Rostom, May

doi:10.2139/ssrn.2669425

Cited by 28 publications

(13 citation statements)

References 19 publications

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“…Mian et al (2013) [30] demonstrated that households with high leverage ratios were more likely to cut consumption expenditure when encountering negative housing price shocks, causing greater macroeconomic fluctuations due to their higher marginal propensity to consume. Bunn et al (2014) [31] demonstrated that, after the financial crisis, households with high debt reduced consumption expenditure due to tight credit conditions and increased concerns about future solvency. Alter et al (2018) [32] believed that households with debt have a different marginal propensity to consume.…”

Section: The Impact Of Household Debt On Consumptionmentioning

confidence: 99%

Income Inequality, Household Debt, and Consumption Growth in the United States

Ying-ai

Sun

et al. 2023

Sustainability

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In this paper, the SV-TVP-VAR model is used to study the relationships between income inequality, household debt, and consumption growth in the US. This is of great significance for studying whether household debt can become a “substitute” for income and whether it is possible to achieve sustainable growth in consumption under the background of worsening income inequality. According to the research results, the main conclusions are as follows: Firstly, the widening of income inequality would increase consumption in the short term but restrain consumption in the medium and long term, as the relationship between them would turn from positive to negative. Secondly, household debt could improve consumption in the short term but reduce consumption in the medium and long term, with long-term effects being greater than medium-term effects, which means that the long-term negative impact of US household debt on household consumption would be persistent. Lastly, widening income inequality has led to rising household debt over different maturities.

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Section: The Impact Of Household Debt On Consumptionmentioning

confidence: 99%

Income Inequality, Household Debt, and Consumption Growth in the United States

Ying-ai

Sun

et al. 2023

Sustainability

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“…Absent broad-based wage-led growth, the conventional account of the Blair years as a period in which demand was fuelled by household borrowing, which ultimately proved unsustainable, is still valid. During this period, borrowing functioned in part as a substitute for rising wages as a source of improved living standards for lower income households, and as a source of demand for the economy as a whole (Bunn and Rostom, 2014; Stockhammer, 2015).…”

Section: Blair and The Knowledge Economymentioning

confidence: 99%

Demand, dysfunction and distribution: The UK growth model from neoliberalism to the knowledge economy

O’Donovan

2021

The British Journal of Politics and International Relations

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Theories of ‘growth models’ explain capitalist diversity by reference to shifting drivers of aggregate demand in different national economies. This article expands the growth models framework beyond its conventional focus on debt-driven and export-driven demand, through an ideational analysis of Thatcher’s vision of a property-owning democracy, and Blair’s knowledge-driven growth agenda. Drawing on policymakers’ statements, it shows how these hypothetical growth models differed from the debt-driven growth model that ultimately prevailed. Using data on the distribution of wealth and wages, it highlights how both approaches failed to generate sustainable demand; in Thatcher’s case, because of an insufficiently broad distribution of capital ownership, in Blair’s case, because of an insufficiently broad distribution of lucrative knowledge work. This indicates that explanations of dysfunctional growth models need to consider not just the split of national income between labour and capital, but also the distribution of both labour income and capital income between households.

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“…In short, during the Great Recession, what was optimal and efficient, economically and socially, was not done (Varoufakis et al, 2013). As a necessary, but not sufficient condition, in a private debt crisis, the size of the banking system must be reduced in line with the real economy at the expense of management, owners and creditors; at the same time, part of the debt must be restructured (Leigh et al 2012;Bunn and Rostom 2014;Mian and Sufi 2014;Dobbs et al 2015). But further reforms of the financial system are needed.…”

Section: Some Brief Lessons For Economic Policy: the Role Of Private ...mentioning

confidence: 99%

The timely overestimation of Spanish GDP in the great recession

Barba¹,

Laborda

2021

Cambridge Journal of Economics

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The inefficient institutional design of the Euro allowed guaranteed bank liabilities to be converted into government debt, deepening the Great-Recession in Southern European countries. A recessive feedback process occurred through an increase in sovereign debt risk premiums in a cycle of global risk aversion. However, there was one fact that limited these negative effects. We refer to the overestimation of Spanish gross domestic product (GDP) in the public accounts for the period 2007–2013. We quantified the unexplained overestimation of Spain’s GDP for the period 2007–2013 using three different methodologies, which leads us to a similar conclusion: Spain’s GDP was overestimated by between 17% and 18%. We demonstrate that this overestimation allowed for significant savings in interest payments through a lower risk premium. This overestimation, unknown to investors, shows that markets are not efficient, and that information is incomplete. It is necessary to understand the role of debt under Hyman Minsky financial instability hypothesis.

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Household Debt and Spending in the United Kingdom

Cited by 28 publications

References 19 publications

Income Inequality, Household Debt, and Consumption Growth in the United States

Income Inequality, Household Debt, and Consumption Growth in the United States

Demand, dysfunction and distribution: The UK growth model from neoliberalism to the knowledge economy

The timely overestimation of Spanish GDP in the great recession

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